As filed with the Securities and Exchange Commission on June 26, 1996.
Registration No. 333-
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT ON FORM S-3
Under
THE SECURITIES ACT OF 1933
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3698386
- --------------------------- ------------------------------------------
(State of Incorporation) (I.R.S. Employer Identification Number)
40 Elmont Road
Elmont, New York 11003
(516) 326-1940
(Address and telephone number of principal executive offices)
Shelly Finkel
Chairman of the Board
Global Telecommunication Solutions, Inc.
40 Elmont Road
Elmont, New York 11003
(516) 326-1940
(Name, address and telephone number of agent for service)
Copies to:
David Alan Miller, Esq.
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
(212) 818-8800
(212) 818-8881 - Telecopy
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<PAGE>
<TABLE>
==================================================================================================================================
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------------
Proposed
Proposed Maximum
Maximum Aggregate
Title of Each Class of Amount to be Offering Price Offering Amount Of
Securities to be Registered Registered Per Unit(1) Price(2) Registration Fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1,718,318 $7,732,431.00 $2,666.36
600,000 $4.50 $2,700,000.00 $931.03
Common Stock, $.01 par value 52,805 $237,622.50 $81.94
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value,
issuable upon conversion of 906,682 $4.50 $4,080,069.00 $1,406.92
Convertible Debentures(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value,
underlying Debenture Common Stock 21,255 $4.50 $95,647.50 $32.98
Purchase Warrants(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Redeemable Common Stock Purchase 1,200,000 $1.625 $1,950,000.00 $672.41
Warrants(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value,
underlying Redeemable Common Stock 1,200,000 $4.50 $5,400,000.00 $1,862.07
Purchase Warrants(3)(4)
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value,
underlying Redeemable Common Stock 1,200,000 $4.00 $4,800,000.00 $1,655.17
Purchase Warrants(3)(5)
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Common Stock, $.01 par value,
underlying April 95 Common Stock 50,000 $4.50 $225,000.00 $77.59
Purchase Warrant(3)
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Common Stock, $.01 par value,
underlying October 95 Common Stock 50,000 $4.50 $225,000.00 $77.59
Purchase Warrant(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value,
underlying January 96 Common Stock 200,000 $4.50 $900,000.00 $310.34
Purchase Warrant(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock $.01 par value, 60,000 $4.50 $270,000.00 $93.10
underlying Unit Purchase Option(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Redeemable Common Stock Purchase
Warrants underlying Unit Purchase 120,000 $1.625 $195,000.00 $67.24
Option(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value,
underlying Redeemable Common Stock
Purchase Warrants issuable pursuant 120,000 $4.00 $480,000.00 $165.52
to Unit Purchase Option(3)(6)
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value,
underlying Redeemable Common Stock
Purchase Warrants issuable pursuant 120,000 $4.50 $540,000.00 $186.21
to Unit Purchase Option(3)(7)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL FEE................................................$10,286.47
===================================================================================================================================
(footnotes on next page)
ii
<PAGE>
<FN>
(1) Based upon the market price of the Common Stock, as reported by The
Nasdaq Stock Market, on June 21, 1996, in accordance with Rule 457(c)
promulgated under the Securities Act of 1933, as amended ("Securities
Act").
(2) The proposed maximum aggregate offering price, based upon the market
price of the Common Stock, as reported by The Nasdaq Stock Market, on
June 21, 1996, in accordance with Rules 457(c) under the Securities
Act.
(3) Pursuant to Rule 416, there are also being registered additional shares
of Common Stock as may become issuable pursuant to the antidilution
provisions in the instruments governing the Convertible Debentures,
Debenture Warrants, various other warrants registered herein, Unit
Purchase Option and Redeemable Common Stock Purchase Warrants pursuant
to which the shares of Common Stock registered hereon are issuable.
(4) Represents the resale of shares of Common Stock underlying the
Redeemable Common Stock Purchase Warrants by the holders of such
warrants ("Warrant Holders") who purchased the securities in a private
placement of these and certain other securities consummated in May
1996.
(5) Represents the issuance of shares of Common Stock to the holders of the
Redeemable Common Stock Purchase Warrants who purchase such warrants
from the Warrant Holders.
(6) Represents the resale of shares of Common Stock underlying the
Redeemable Common Stock Purchase Warrants by holders of such warrants
("UPO Holders") who exercised the Unit Purchase Option, which Unit
Purchase Option was acquired in connection with a private placement of
securities consummated in May 1996.
(7) Represents the issuance of shares of Common Stock to holders of the
Redeemable Common Stock Purchase Warrants who acquired such warrants
from the UPO Holders.
</FN>
</TABLE>
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
<PAGE>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
---------------------------
CROSS REFERENCE SHEET
---------------------------
Form S-3
Item Number and Heading Caption or Location in Prospectus
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus Inside Front Cover Page
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Selling Securityholders; Plan of
Distribution
6. Dilution Not Applicable
7. Selling Security Holders Selling Securityholders; Plan of
Distribution
8. Plan of Distribution Outside Front Cover Page;
Selling Securityholders;
Plan of Distribution
9. Description of Securities to
be Registered Not Applicable
10. Interest of Named Experts and Counsel Experts
11. Material Changes Prospectus Summary
12. Incorporation of Certain Information
by Reference Incorporation of Certain
Documents by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities Selling Securityholders
iii
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE ___, 1996
PROSPECTUS
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
4,979,060 Shares of Common Stock
1,320,000 Common Stock Purchase Warrants
This Prospectus relates to up to 4,979,060 shares ("Shares") of Common
Stock, par value $.01 per share, of Global Telecommunication Solutions, Inc.
("Company") and 1,320,000 Redeemable Common Stock Purchase Warrants ("Redeemable
Warrants"), each Redeemable Warrant to purchase one share of Common Stock for
$4.00 at any time until December 14, 1999, that may be offered for resale for
the account of certain securities holders ("Selling Securityholders") of the
Company as set forth herein under the heading "Selling Securityholders."
The Redeemable Warrants may be redeemed by the Company, with the consent
of Whale Securities Co., L.P. ("Whale"), upon notice of not less than 30 days,
at a price of $.10 per Redeemable Warrant, provided that the closing bid
quotation of the Common Stock on all 20 trading days ending on the third day
prior to the day on which the Company gives notice, has been at least 187.5% of
the then effective exercise price of the Redeemable Warrants (currently $7.50,
subject to adjustment).
Of the 4,979,060 Shares being offered for resale by the Selling
Securityholders, (i) 2,371,123 Shares are currently outstanding, (ii) 906,682
Shares are issuable upon conversion of the Company's 6% Senior Secured
Convertible Debentures ("Convertible Debentures"), (iii) 21,255 Shares are
issuable upon exercise of the Common Stock purchase warrants issued in
connection with the issuance of the Convertible Debentures ("Debenture
Warrants"), (iv) 1,200,000 Shares are issuable upon exercise of the Redeemable
Common Stock Purchase Warrants ("Redeemable Warrants") issued in connection with
a private placement consummated by the Company in May 1996 ("May 1996 Private
Placement"), (v) 300,000 Shares are issuable upon exercise of the Common Stock
purchase warrants issued to Whale and certain designees in April 1995 (50,000
Shares), October 1995 (50,000 Shares) and January 1996 (200,000 Shares)
(collectively, the "Consulting Warrants"), (vi) 60,000 Shares are issuable upon
exercise of the unit purchase option ("UPO") issued to Whale in connection with
the May 1996 Private Placement and (vii) 120,000 Shares are issuable upon
exercise of the Redeemable Warrants underlying the UPO. Of the 1,320,000
Redeemable Warrants being offered for sale by the Selling Securityholders, (i)
1,200,000 Redeemable Warrants were issued in connection with the May 1996
Private Placement and are currently outstanding and (ii) 120,000 Redeemable
Warrants are issuable upon exercise of the UPO.
All of the Shares and Redeemable Warrants are being offered hereby for
the respective accounts of the Selling Securityholders. No period of time has
been fixed within which the securities covered by this Prospectus may be offered
or sold. The Company will not receive any of the proceeds from the sale of the
Shares and Redeemable Warrants by the Selling Securityholders. Of the 4,979,060
Shares offered hereby, 1,701,255 Shares are issuable upon exercise of the
Redeemable Warrants, Debenture Warrants, Consulting Warrants and UPO. If such
securities are fully exercised, the Company will receive up to an aggregate of
$7,201,682 in gross proceeds, before deduction of the 5% warrant solicitation
fee which may be payable to Whale ($264,000, assuming that the fee is payable
with respect to all of the Redeemable Warrants). All proceeds received by the
Company, if any, will be used for working capital and general corporate
purposes. See "Use of Proceeds" and "Selling Securityholders."
All costs, expenses and fees in connection with the registration of the
Shares and Redeemable Warrants offered by this Prospectus will be borne by the
Company. Such expenses are estimated to be $50,000. Brokerage commissions and
discounts, if any, attributable to the sale of the Shares and Redeemable
Warrants for the account of Selling Securityholders will be borne by them.
The principal market for trading of the Common Stock and the Redeemable
Warrants is the Nasdaq SmallCap Market under the symbols GTST and GTSTW,
respectively. On June 21, 1996, the last sale price for the Common Stock was
$4.50 and for the Redeemable Warrants was $1.625 as reported by the Nasdaq
SmallCap Market. The Common Stock and the Redeemable Warrants also are listed on
the Boston Stock Exchange under the symbols GTL and GTLW, respectively.
<PAGE>
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 9.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ___________, 1996.
<PAGE>
No person is authorized in connection with any offering made hereby to give any
information or to make any representation not contained in this Prospectus, and
if given or made, such information or representation must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any security other than the
Common Stock offered hereby, nor does it constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby to any
person in any jurisdiction in which it is unlawful to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any date subsequent to the date
hereof.
TABLE OF CONTENTS
Page
TABLE OF CONTENTS.............................................. 2
AVAILABLE INFORMATION.......................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................ 3
PROSPECTUS SUMMARY............................................. 4
RISK FACTORS.................................................... 9
USE OF PROCEEDS................................................. 16
SELLING SECURITYHOLDERS......................................... 16
PLAN OF DISTRIBUTION............................................ 24
LEGAL MATTERS................................................... 25
EXPERTS......................................................... 25
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
("Commission"), in Washington, D.C., a Registration Statement on Form S-3
("Registration Statement") under the Securities Act of 1933, as amended
("Securities Act") with respect to the Shares and Redeemable Warrants offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and exhibits thereto. For further information with
respect to the Company, the Shares and the Redeemable Warrants, reference is
hereby made to the Registration Statement and exhibits. The statements contained
in this Prospectus as to the contents of any contract or other document filed as
an exhibit are not complete and the description of such contract or document is
qualified in its entirety by reference to such contract or document. The
Registration Statement, together with the exhibits, may be inspected at the
Commission's principal office in Washington, D.C. and copies may be obtained
upon payment of the fees prescribed by the Commission.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Copies of such information, reports, proxy statements and other
information filed by the Company under the Exchange Act may be examined without
charge at the public reference facilities of the Commission, Judiciary Plaza,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the
following Regional Offices: 14th Floor, 75 Park Place, New York, NY 10007; and
Room 3190, John C. Kluczynski Federal Building, 230 South Dearborn Street,
Chicago, IL 60604. Copies can also be obtained at prescribed rates from the
Commission's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, all reports filed by the
2
<PAGE>
Company via the Commission's Electronic Data Gathering and Retrieval System
(EDGAR) can be obtained from the Commission's Internet Web Site located at
www.sec.gov. The Common Stock and Redeemable Warrants are traded on the Nasdaq
SmallCap Market (Symbols: GTST and GTSTW), and such reports, proxy statements
and other information concerning the Company also can be inspected at the
offices of the Nasdaq SmallCap Market, 1735 K Street, N.W., Washington, D.C.
20006. The Common Stock and Redeemable Warrants also are listed on the Boston
Stock Exchange (Symbols: GTL and GTLW) and information concerning the Company
can be inspected and copied at The Boston Stock Exchange, Inc., One Boston
Place, Boston, Massachusetts 02108.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which are on file with the Commission (Exchange
Act File No. 1-13478) are incorporated in this Prospectus by reference and made
a part hereof:
(a) Annual Report on Form 10-KSB of the Company for the year ended
December 31, 1995;
(b) Current Report of the Company on Form 8-K for merger filed on
March 15, 1996, and amendment thereto on Form 8-K/A, filed on May
10, 1996;
(c) Quarterly Report on Form 10-QSB of the Company for the three
months ended March 31, 1996; and
(d) Proxy Statement dated July ___, 1996.
The Company's Registration Statement on Form 8-A (which contains
descriptions of the Company's Common Stock and Redeemable Warrants), which was
declared effective by the Commission on December 14, 1994, is also incorporated
in this Prospectus by reference and made a part hereof.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this Offering shall be deemed to be
incorporated by reference in this Prospectus and shall be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference in this Prospectus and filed with the Commission prior
to the date of this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein, or
in any other subsequently filed document which is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Written or telephone requests
should be directed to the Company at 40 Elmont Road, Elmont, New York 11003,
Attention: Investor Relations (telephone number:
(516) 326-1940).
3
<PAGE>
PROSPECTUS SUMMARY
The information set forth below is qualified in its entirety by the
information set forth in those documents incorporated herein by reference.
Certain of the information contained in this summary and elsewhere in this
Prospectus are forward-looking statements. For a discussion of important factors
that could cause actual results to differ materially from the forward-looking
statements, see "Risk Factors."
The Company
General
Global Telecommunication Solutions, Inc. and its subsidiaries ("Company"
or "GTS") design, develop and market prepaid phone cards featuring licensed,
promotional and standard graphics. The Company markets its prepaid phone cards
as a convenient alternative to credit calling cards and conventional coin or
collect long distance calls. The Company also provides card user access to long
distance service through its switching facilities and long distance network
arrangements. The Company's phone cards are designed to promote a high level of
consumer awareness and appeal by combining creative graphic designs and
widely-recognized concepts, characters and/or images with long distance service
features and ancillary advertising and promotional benefits, such as broadcast
messaging, voice mail, foreign language instruction, customized information and
advertising, celebrity and character voices and customized greetings.
Recent Events
Acquisition of Global Link
The Company acquired Global Link Teleco Corporation ("Global Link") by
merging (the "Merger") the Company's wholly-owned subsidiary, Link Acquisition
Corp., with and into Global Link, with Global Link surviving the Merger as a
wholly-owned subsidiary of the Company. The Merger was effective March 1, 1996.
Global Link is engaged in the marketing and selling of prepaid phone cards
through its retail phone centers in the New York City metropolitan area and in
South Miami Beach, Florida, and a diverse wholesale distribution network.
Global Link markets its prepaid phone cards through various wholesale
distributors and retailers, including supermarkets, convenience stores, travel
agents and tour wholesalers, to consumers seeking economical and convenient long
distance services and to international travelers for use in the United States
and abroad. Global Link also markets its prepaid phone cards to corporations
seeking phone cards for promotional use, internal use or sale to the
corporations' customers.
Global Link's retail phone centers are brightly lit environments located
in urban shopping areas having a high volume of pedestrian traffic. Each retail
phone center has a street level store front offering high and easy
accessibility. These retail phone centers provide two primary functions: (i) to
sell Global Link's phone cards and (ii) to enable the customers to place
telephone calls and pay for those calls with the phone card. Other services,
including money transfers, mailbox rentals, photocopying, may also be provided
at some of Global Link's retail phone centers. Such other services, however, do
not and are not expected to constitute a material part of the retail phone
centers' business. Global Link currently operates 12 retail phone centers in
Brooklyn and Queens, New York and South Miami Beach, Florida.
The following pro forma combined statement of operations (unaudited)
combines on a purchase basis of accounting, the statements of operations of the
Company and Global Link for the three months ended March 31, 1996. The pro forma
statement of operations gives effect to the acquisition of Global Link as if it
occurred at the beginning of the year.
4
<PAGE>
The pro forma combined statement of operations is not necessarily
indicative of future operating results and should not be used as a forecast of
future operations. This pro forma combined financial statement should be read in
conjunction with the notes to the pro forma combined financial statements and
the historical financial statements of both companies.
<TABLE>
Three Months Ended March 31, 1996 - Unaudited
Global
Telecommunication Global Link Pro Forma
Solutions, Inc. Teleco Corp. Adjustments Pro Forma
<S> <C> <C> <C> <C>
Net sales............................. $594,862 $2,095,878 -- $2,690,740
Cost of sales......................... (570,208) (1,368,753) -- (1,938,961)
Gross profit........................ 24,654 727,125 -- 751,779
Operating expenses.................... 990,400 1,514,684 225,643(a) 2,730,727
Operating loss........................ (965,746) (787,559) (225,643) (1,978,948)
Other income (expense):
Interest income..................... 19,581 255 -- 19,836
Interest expense.................... -- (136,702) 94,597(b) (42,105)
Other............................... -- 4,200 -- 4,200
Loss before income taxes......... (946,165) (919,806) (131,046) 1,997,017
Provision for income taxes............ -- -- -- --
Net loss for period.............. (946,165) (919,806) (131,046) 1,997,017
Net loss per share.................... $(.41)
Weighted average common shares
outstanding........................ $4,912,801(c)
- --------------------------
<FN>
(1) Basis of Presentation
The acquisition of Global Link is accounted for as a purchase and, in
accordance with generally accepted accounting principles, the purchase
price is allocated to the assets and liabilities of Global Link based on
their fair values at the date of acquisition.
(2) Pro Forma Adjustments and Assumptions
The pro forma combined financial statements of the Company and Global
Link give effect to the following pro forma adjustments and assumptions:
(a) To record the amortization of goodwill on a straight-line basis
over 15 years and to eliminate amortization of the predecessor's
goodwill.
(b) To eliminate interest expense on amounts due to Peoples Telephone
Company, Inc. ("Peoples"), which were adjusted as a result of an
agreement pursuant to which Peoples accepted $1,050,000 ($550,000
of which was paid on the merger date and $500,000 plus interest at
the rate of 8% per annum, which is payable on June 28, 1996) and
52,805 shares of the Company's Common Stock in full satisfaction
of all amounts due Peoples other than $954,630 of accounts
payable.
(c) Represents the weighted average common shares outstanding during
1995, plus 1,771,123 shares of the Company's Common Stock issued
in connection with the merger.
</FN>
</TABLE>
5
<PAGE>
Private Placement
In May 1996, the Company consummated a private placement ("May 1996
Private Placement") from which the Company derived gross proceeds of $3,000,000
through the sale of 30 units ("Units"), each consisting of 20,000 shares of
Common Stock and 40,000 Redeemable Warrants. The Redeemable Warrants are
identical to the publicly-traded Redeemable Warrants of the Company listed on
the Nasdaq SmallCap Market under the symbol "GTSTW" and on the Boston Stock
Exchange under the symbol "GTLW." The Company has agreed, however, that,
notwithstanding the terms of its publicly-traded Redeemable Warrants, the
Redeemable Warrants sold in the May 1996 Private Placement are not redeemable by
the Company until (i) registered for public sale under the Securities Act
pursuant to the registration statement of which this Prospectus forms a part,
and (ii) transferred by the original purchasers thereof.
Whale served as the placement agent in connection with the May 1996
Private Placement and received a commission equal to 10% of the gross proceeds
from the sale of the Units (except that there was no commission paid with
respect to 2-1/2 Units sold to certain purchasers) and a $15,000 nonaccountable
expense allowance. Whale also received an option ("UPO") to purchase three Units
(up to 60,000 Shares and 120,000 Redeemable Warrants) at an exercise price of
$100,000 per Unit, exercisable until May 10, 2001.
Market Overview
The markets for prepaid phone cards have grown in recent years. Advances
in long distance telephone services, coupled with the convenience and features
of prepaid phone cards, have resulted in demand for and increasing use of phone
cards for various business and personal reasons. The number of prepaid phone
cards sold as collectors' items in worldwide markets has also increased and
prepaid phone cards have become popular with large corporations for internal use
and in connection with marketing, advertising and promotional activities.
Although the markets for prepaid phone cards in Europe and Japan have matured,
markets in the United States are emerging and are largely undeveloped. According
to industry sources, domestic prepaid phone card sales were approximately $75
million in 1993 and grew to approximately $500 million in 1995.
Two types of prepaid phone card technologies are currently used in the
United States. Most domestic prepaid phone cards, including the Company's cards,
utilize a remote memory technology, which permits users to place domestic and
international calls from any touch-tone phone by calling a toll-free 800 number
and entering a PIN number printed on the back of the card. In contrast, "smart"
card technology utilizes computer chips, magnetic strips or optical readers
incorporated into the cards which must be swiped or inserted through a
specially-designed device incorporated into the telephone. Smart card technology
requires the replacement of standard telephones with telephones that have
mechanisms capable of reading such cards. Smart card technology is currently in
widespread commercial use in Europe and Japan and has been introduced in the
United States on a limited basis. The Company plans to incorporate smart card
technology into its phone cards if and when performance issues make it a viable
alternative to remote memory technology.
Strategy
The Company is pursuing a growth strategy to capitalize on its early
entrance into the emerging and expanding markets for prepaid phone cards in the
United States and Canada, and on the marketability of the licensed concepts
featured on many of the Company's cards. Significant components of the Company's
strategy include: (i) increasing demand for phone cards by expanding retail
distribution to enhance market penetration and utilizing popular concepts,
images and graphics licensed to the Company on its prepaid phone cards to
heighten consumer interest; (ii) encouraging corporations to use the Company's
phone cards for internal use and in connection with their marketing, advertising
and
6
<PAGE>
promotional activities; (iii) expanding the Company's international network of
distributors to market the Company's phone cards overseas; (iv) creating and
marketing interactive applications which can be accessed by using the Company's
phone cards; (v) pursuing the acquisition of companies that fit within the
Company's business strategy and which can, through economies of scale, improve
the Company's operating margins; and (vi) maintaining the Company's retail phone
center operations. The Company also intends to continue development of
multi-functional debit card applications for entities such as colleges, sporting
arenas and theme parks which can be used by consumers to make small item
purchases offered at and sold by such entities, as well as for placing long
distance telephone calls. The Company seeks to develop the components of its
strategy both internally and, where appropriate, through joint venture
arrangements. There can be no assurance that the Company's strategy will be
successful.
Corporate Background
GTS and Global Link were incorporated under the laws of the State of
Delaware in December 1992 and March 1994, respectively. The Company's principal
executive offices are located at 40 Elmont Road, Elmont, New York 11003 and its
telephone number is (516) 326-1940. Global Link's offices are located at 5697
Rising Sun Avenue, Philadelphia, Pennsylvania 19120 and its telephone number is
(215) 342- 7700.
The Offering
Securities offered by Selling
Securityholders..................... 4,979,060 shares of Common Stock
1,320,000 Redeemable Warrants
Risk Factors.......................... An investment in the securities
offered hereby involves
a high degree of risk. See "Risk
Factors."
Nasdaq SmallCap Market Symbols........ Common Stock: GTST
Warrants: GTSTW
Boston Stock Exchange Symbols......... Common Stock: GTL
Warrants: GTLW
Use of Proceeds....................... The Company will not receive any of
the proceeds from the sale of the
Shares and Redeemable Warrants by
the Selling Securityholders. Of
the 4,979,060 Shares offered
hereby, 1,701,255 Shares are
issuable upon exercise of the
Redeemable Warrants, Debenture
Warrants, Consulting Warrants and
UPO. If such securities are fully
exercised, the Company will receive
up to an aggregate of $7,201,682 in
gross proceeds, before deduction of
the 5% warrant solicitation fee
which may be payable to Whale
($264,000, assuming that the fee is
payable with respect to all of the
Redeemable Warrants). All proceeds
received by the Company, if any,
will be used for working capital
and general corporate purposes. See
"Use of Proceeds" and "Selling
Securityholders."
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Outstanding Securities
Common Stock. As of June 21, 1996, there were 5,512,801 shares of Common
Stock outstanding. Assuming the conversion of all of the Convertible Debentures
and exercise of all of the Debenture Warrants, Redeemable Warrants, Consulting
Warrants and the UPO, but without giving effect to the exercise of other
outstanding warrants and options, there will be 11,062,416 shares of Common
Stock outstanding.
Warrants. As of June 21, 1996, there were outstanding 4,141,678
Redeemable Warrants, each of which entitles the holder thereof to purchase one
share of Common Stock for $4.00 through December 14, 1999. Additionally, the
Company may issue up to 270,000 Redeemable Warrants upon exercise of the UPO and
an option issued to Whale in connection with the Company's initial public
offering consummated on December 14, 1994. The Redeemable Warrants may be
redeemed by the Company, with the consent of Whale, upon notice of not less than
30 days, at a price of $.10 per Redeemable Warrant, provided that the closing
bid quotation of the Common Stock on all 20 trading days ending on the third day
prior to the day on which the Company gives notice, has been at least 187.5% of
the then effective exercise price of the Redeemable Warrants (currently $7.50,
subject to adjustment).
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<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree
of risk. Each prospective investor should carefully consider the following risk
factors before making an investment decision.
Limited Operating History and Revenues; Significant and Continuing
Losses; Accumulated and Working Capital Deficits. The Company was organized in
December 1992 and Global Link was incorporated in March 1994. Accordingly, the
Company has a limited operating history upon which an evaluation of its future
performance and prospects can be made. The Company's prospects must be
considered in light of the risks, expenses, delays, problems and difficulties
frequently encountered in the establishment of a new business in an emerging and
evolving industry characterized by intense competition. Since inception, the
Company has generated limited revenues and has incurred significant losses,
including losses of $1,946,526 and $2,970,121, respectively, for the years ended
December 31, 1994 and 1995 and Global Link has generated only limited revenues
and has incurred significant losses since its inception, including losses of
$548,340 and $4,563,401 for the years ended December 31, 1994 and 1995. Assuming
the Company's acquisition of Global Link occurred on January 1, 1995, on an
unaudited combined pro forma basis, giving effect to the financial results of
Global Link, the Company would have incurred a net loss of $7,765,915 for the
year ended December 31, 1995. For the three months ended March 31, 1996,
assuming that the acquisition occurred on January 1, 1996, on an unaudited
combined pro forma basis, the Company would have incurred a net loss of
$1,997,000. Inasmuch as the Company will continue to have a high level of
operating expenses and will be required to make significant up-front
expenditures in connection with its continuing expansion (including salaries of
executive, creative, sales, marketing and other personnel), the Company
anticipates that losses will continue until such time, if ever, as the Company
is able to generate sufficient revenues to finance its operations and the costs
of continuing expansion. There can be no assurance that the Company will be able
to generate significant revenues or achieve profitable operations. Moreover, as
of March 31, 1996, the Company had an accumulated deficit of $6,674,053 and a
working capital deficit of $5,919,880.
Recent Acquisition of Global Link. The Company only recently acquired
Global Link and has not fully integrated Global Link's operations into the
Company's operations. Although the Company anticipates that its acquisition of
Global Link will improve economies of scale, the Company will be required to
expend a significant amount of time and resources to integrate such operations.
In addition, as a result of the Merger, the Company significantly increased the
size and scope of its operations. Management has no experience in managing an
entity with operations as diverse and expansive as the Company's. There can be
no assurance that the Company will be able to successfully integrate Global
Link's operations into the Company's operations or for the Company to achieve
increased economies of scale.
Significant Outstanding Indebtedness; Security Interests. In connection
with the acquisition of Global Link, the Company assumed significant
indebtedness of Global Link, including $2,800,000 aggregate principal amount of
the Convertible Debentures of Global Link ("Debentures"), payments due from
Global Link to Peoples Telephone Company, Inc. ("Peoples") of $1,050,000,
approximately $955,000 of other indebtedness owed to Peoples, Global Link's
accounts payable and accrued expenses which aggregated $3,478,000 at March 31,
1996, and Global Link's deferred revenues of $2,125,000 at March 31, 1996. Such
indebtedness and deferred revenue is in addition to the approximately $2,330,000
of accounts payable and accrued expenses and deferred revenues of approximately
$3,313,000 of the Company as of March 31, 1996. The Convertible Debentures are
secured by a lien on substantially all of the assets of Global Link. In the
event of a violation or other default by Global Link of its obligations under
the Convertible Debentures or the securities purchase agreement relating to such
Convertible Debentures, the holders of the Convertible Debentures could declare
the Convertible Debentures to be due and payable and, in certain cases,
foreclose on Global Link's assets. Moreover, to the extent that Global Link's
assets continue to secure the Convertible Debentures, such assets will not be
available to secure additional indebtedness, which may adversely affect the
Company's ability to borrow in the future.
9
<PAGE>
New Industry; Uncertainty of Market Acceptance. The prepaid phone card
industry is an emerging business characterized by an increasing and substantial
number of new market entrants who have introduced or are developing an array of
new products and services. Each of these entrants is seeking to position its
products and services as the preferred method for accessing long distance
telephone services, including providing enhanced service features and ancillary
advertising and promotional benefits. As is typically the case in an emerging
industry, demand and market acceptance for newly introduced products and
services are subject to a high level of uncertainty. The Company has limited
marketing experience and limited financial, personnel and other resources to
undertake extensive marketing activities. The Company's success depends in large
part on its ability to attract large corporations to advertise and promote their
products and services using the Company's prepaid phone cards, and also will be
dependent on the level of acceptance and usage by consumers. Because demand by
large corporations, advertisers and marketers, retailers and consumers may be
interrelated, any lack or lessening of demand by any one of these could
adversely affect market acceptance for the Company's products and services. In
light of the relatively small, undeveloped and emerging markets for prepaid
phone cards, there can be no assurance that substantial markets will develop for
prepaid phone cards or that the Company will be able to meet its current
marketing objectives, succeed in positioning its cards and services as a
preferred method for accessing long distance telephone service or achieve
significant market acceptance for its products.
Risks Associated with Marketing Strategy and Rapid Expansion. Although
the Company is pursuing a strategy of growth and seeks to expand its
distribution capabilities to achieve greater penetration in new and emerging
markets, the Company has achieved only limited growth to date. The success of
the Company's expansion is dependent on, among other things, the Company's
ability to establish additional distribution arrangements targeting several
market segments, including retail, promotional and corporate markets; hire and
retain skilled management, financial, marketing, creative and other personnel;
and successfully manage growth (including monitoring operations, controlling
costs and maintaining effective quality, inventory and service controls). The
Company is substantially dependent on the efforts of its distributors' marketing
efforts and the popularity and sales of their products. Although the Company
believes its marketing and distribution relationships are satisfactory, these
arrangements are generally not embodied in written agreements having specific
terms and can be terminated at any time. The Company also may seek to expand its
operations through the possible acquisition of companies in businesses which the
Company believes are compatible with its business. There can be no assurance
that the Company will be able to successfully implement its business strategy or
otherwise expand its operations, or that the Company will ultimately effect any
acquisition or successfully integrate into its operations any business which it
may acquire.
Possible Need for Additional Financing. The Company has been and will be
dependent on the proceeds of its IPO and the May 1996 Private Placement to
implement its plan of expansion and to finance its working capital requirements.
The Company anticipates, based on currently proposed plans and assumptions
relating to its operations (including the costs associated with its proposed
expansion), that the proceeds of the May 1996 Private Placement, together with
projected cash flow from operations, will be sufficient to satisfy its
anticipated cash requirements during 1996. In the event that the Company's plans
change or its assumptions change or prove to be inaccurate or if cash flow
proves to be insufficient to fund the Company's operations after 1996 (due to
unanticipated expenses, delays, problems, difficulties or otherwise), the
Company would be required to seek additional financing or curtail its expansion
activities. The Company may determine, depending upon the opportunities
available to it, to seek additional debt or equity financing to fund the cost of
continuing expansion. To the extent that the Company finances an acquisition
with a combination of cash and equity securities, any such issuance of equity
securities would result in dilution to the interests of the Company's
securityholders. Additionally, to the extent that the Company incurs
indebtedness or issues debt securities in connection with any acquisition, the
Company will be subject to risks associated with incurring substantial
indebtedness, including the risks that interest rates may fluctuate and cash
flow may be insufficient to pay principal and interest on any such indebtedness.
The Company has no current arrangements with respect to, or sources of,
additional financing, and it is not anticipated that existing securityholders
will provide any
10
<PAGE>
portion of the Company's future financing requirements. There can be no
assurance that the Company will achieve cash flow from operations sufficient to
satisfy its working capital requirements, or at all, or that additional
financing will be available to the Company on commercially reasonable terms, or
at all.
Dependence on Third-Party License Arrangements; Certain License
Limitations; NonRecurring Revenues. To date, a substantial portion of the
Company's revenues have been derived from sales of prepaid phone cards featuring
the graphics of a limited number of licensors pursuant to short-term,
non-exclusive license agreements, a decline in the sale of which would have a
material adverse effect on the Company. Sales of phone cards featuring licensed
graphics accounted for approximately 46.7% and 37.3%, respectively, of the
Company's revenues for the years ended December 31, 1994 and 1995. Sales of
cards featuring graphics licensed from Marvel Entertainment Group, Inc.
accounted for approximately 19% of the Company's revenues for the year ended
December 31, 1995. These license agreements generally require the Company to
make advance payments and pay guaranteed minimum royalties. Failure by the
Company to satisfy its obligations under license agreements may result in
modification of the terms, or termination, of the relevant agreement, which
could have a material adverse effect on the Company. The Company's success may
depend upon its licensors' ability to maintain the marketability and consumer
recognition of names, images, likenesses, characters, logos and emblems, and on
the Company's ability to identify and obtain additional licenses for currently
popular graphics upon termination of existing licenses or in the absence of
continuing sales under existing licenses. There can be no assurance that the
Company will have the ability to satisfy all of its obligations under the
license agreements, that any such license agreements will be renewed or result
in profitable operations or that the Company will be able to obtain additional
license agreements on favorable terms. In addition, for the years ended December
31, 1994 and 1995, approximately 10.2% and 25.2%, respectively, of the Company's
revenues were derived from sales of promotional cards to a limited number of
customers, all of which sales are non-recurring in nature. There can be no
assurance that the Company will not remain largely dependent on non-recurring
sales of promotional cards to a limited customer base for a significant portion
of its revenues.
Intense Competition. The Company faces intense competition in the
marketing and sale of its products and services. The Company's prepaid phone
cards and long distance services compete for consumer recognition with other
prepaid phone cards, credit calling cards and long distance telephone services
which have achieved significant international, national and regional consumer
loyalty. Many of these products and services are marketed by companies which are
well-established, have reputations for success in the development and sale of
products and services and have significantly greater financial, marketing,
distribution, personnel and other resources than the Company, thereby permitting
such companies to implement extensive advertising and promotional campaigns,
both generally and in response to efforts by additional competitors to enter
into new markets and introduce new products and services. Certain of these
competitors, including American Telephone & Telegraph Company ("AT&T"), MCI
Telecommunications Corporation ("MCI") and Sprint Corporation ("Sprint"),
dominate the telecommunications industry and have the financial resources to
enable them to withstand substantial price competition, which is expected to
increase significantly. These and other large telephone companies, as well as
retailers, have also entered or have announced their intention to enter into the
prepaid phone card segment of the industry. In addition, because the prepaid
phone card segment of the industry has no substantial barriers to entry,
competition from smaller competitors in the Company's target markets is also
expected to continue to increase significantly. Since most of the Company's
licenses are non-exclusive and certain of its licenses are limited in scope, the
Company's licensors may also license the same or other graphics to the Company's
competitors, which could adversely affect the marketability of the Company's
licensed graphic cards. Moreover, to the extent that the Company's cards are
marketed as promotional or collectors' items, such cards will also compete with
other products produced as promotional giveaways and sold as collectibles. There
can be no assurance that the Company will be able to compete successfully in its
markets.
Consumer Preferences and Industry Trends; Possible Technological and
Product Obsolescence. The telecommunications industry is characterized by
frequent introduction of new
11
<PAGE>
products and services, and is subject to changing consumer preferences and
industry trends, which may adversely affect the Company's ability to plan for
future design, development and marketing of its products and services.
Additionally, the Company's current licensing arrangements consist principally
of comic book characters and sports-related images, which are subject to
relatively frequent and rapid changes in consumer tastes and preferences. The
markets for the telecommunications products and services are also characterized
by rapidly changing technology and evolving industry standards, often resulting
in product obsolescence or short product life cycles. The proliferation of new
telecommunications technologies, including personal communication services,
cellular telephone products and services and prepaid phone cards employing
alternative technologies, may reduce demand for prepaid phone cards generally as
well as for phone cards employing the Company's remote memory technology. NYNEX
Corporation, a leading regional telephone company, has installed telephone
equipment in New York City employing "smart" card technology. Such technology
could be perceived as a more convenient method of accessing long distance
service than remote memory technology. The proliferation and widespread
commercial use of telephone equipment employing such technology could materially
adversely affect demand for the Company's prepaid phone cards. The Company's
success will depend on the Company's ability to anticipate and respond to these
and other factors affecting the industry, including new products and services
which may be introduced. There can be no assurance that the Company will be able
to anticipate and respond to changing consumer preferences and industry trends
or that competitors will not develop and commercialize new technologies or
products that render the Company's products and services obsolete or less
marketable.
Dependence on Third-Party Long Distance Carriers; Possible Service
Interruptions and Equipment Failures; Unauthorized Access to Services. The
Company is currently dependent on a limited number of domestic and international
long distance carriers to provide access to long distance telephone service on a
cost-effective basis. The Company has entered into interconnect agreements or
arrangements with long distance carriers, pursuant to which the Company leases
phone lines and transmission facilities necessary to transmit consumer calls.
Although the Company believes that it currently has sufficient access to
transmission facilities and long distance networks on favorable terms and
believes that its relationships with its carriers are satisfactory, any increase
in the rates charged by carriers would materially adversely affect the Company's
operating margins. Failure to obtain continuing access to such facilities and
networks would also have a material adverse effect on the Company, including
possibly requiring the Company to significantly curtail or cease its operations.
In addition, the Company's operations require that its switching facilities and
its carriers' long distance networks operate on a continuous basis. It is not
atypical for telephone carriers and switching facilities to experience service
interruptions and equipment failures which could last for a significant period
of time. It is possible that the Company's switching facilities and its
carriers' long distance networks may from time to time experience service
interruptions or equipment failures. Service interruptions and equipment
failures resulting in material delays would adversely affect consumer confidence
as well as the Company's business operations and reputation. The Company and
Global Link have in the past experienced unauthorized access to their switching
services by unauthorized disclosure of a pin number and unauthorized activation
of prepaid phone cards, respectively, which have resulted in the Company and
Global Link being unable to recover the long distance service and switching
charges associated with such calls. Continued unauthorized access to the
Company's services could have a material adverse effect on the Company's
operations.
Regulatory Factors. Long distance telecommunications services are
subject to regulation by the Federal Communications Commission (the "FCC") and
by state regulatory authorities. Among other things, these regulatory
authorities impose regulations governing the rates, terms and conditions for
interstate and intrastate telecommunications services. Changes in existing laws
and regulations, particularly the Telecommunications Act of 1996 (the
"Telecommunications Act"), which allows for all providers of telecommunications
services to participate in all aspects of the telecommunications market, may
have a significant impact on the Company's activities and on the Company's
operating results. The Company believes that it is in substantial compliance
with all material laws, rules and regulations governing its operations and has
obtained, or is in the process of obtaining, all licenses, tariffs and approvals
necessary for the conduct of its business. There can be no assurance, however,
that the Company will be able to
12
<PAGE>
obtain required licenses or approvals in the future or that the FCC or state
regulatory authorities will not require the Company to comply with more
stringent regulatory requirements. Conformance of the Company's operations with
of new statutes and regulations and expansion of the Company's operations into
new geographic markets could require the Company to alter methods of operation,
at costs which could be substantial, or otherwise limit the types of services
offered by the Company. There can be no assurance that the Company will be able
to comply with additional applicable laws, regulations and licensing
requirements. The Company is also subject to Federal Trade Commission regulation
and other federal and state laws relating to the promotion, advertising,
labeling and packaging of its products.
On June 6, 1996, the FCC issued a Notice of Proposed Rulemaking
("NPRM"), pursuant to which it proposed to adopt new rules governing the pay
telephone industry, as directed by the Telecommunications Act. This proposed
rulemaking requires the FCC to establish a means by which all pay telephone
service providers are to be compensated for interstate and intrastate calls
originated from their pay telephones, including calls which utilize "800" toll
free access. If adopted, such rules may require phone card companies utilizing
800 toll free telephone numbers to access their networks to pay a "set use fee"
for each call originating from a pay telephone. The Company's prepaid phone
cards utilize an 800 number to access the Company's switched network. The
promulgation of the rules proposed by the NPRM has not been effectuated and such
proposal has been, and is expected to continue to be, the subject of numerous
comments by members of the telecommunications industry and others. Consequently,
there can be no assurance that the NPRM will result in the adoption of rules
consistent with the form initially proposed in the NPRM, or that such rules will
be adopted at all. Until such rules are actually adopted, the rules currently in
existence remain in effect, which rules do not require the Company to pay set
use fees. If new rules are adopted which require the Company to pay such fees,
it could have a material adverse effect on the Company.
Possible Inability to Recognize Deferred Revenue; Possibility of Phone
Cards Expiring Unsold. The sale of long distance telephone service through
prepaid phone cards may be subject to "escheat" laws in various states. These
laws generally provide that payments or deposits received in advance or in
anticipation of the provision of utility (including telephone) services that
remain unclaimed for a specific period of time after the termination of such
services are deemed "abandoned property" and must be submitted to the state.
Although the Company is not aware of any case in which such laws have been
applied to the sale of prepaid phone cards, and does not believe that such laws
are applicable, in the event that such laws are deemed applicable, the Company
may be unable to recognize a portion of its deferred revenue remaining upon the
expiration of phone cards with unused calling time. In such event, the Company
may be required to deliver such amounts to certain states in accordance with
these laws, which could have a material adverse effect on the Company. In
addition, substantially all of the Company's prepaid phone cards have an
expiration date (generally 12 to 18 months after issuance or 12 months after
last use). To the extent that the Company is unable to sell any phone cards
prior to their expiration date, the Company will no longer be able to sell such
phone cards and will be required to write off the printing and production costs
associated with such cards.
Locations of Retail Phone Centers. The Company currently operates twelve
retail phone centers located in the New York City metropolitan area and in South
Miami Beach, Florida. The Company has no experience in opening or operating
phone centers in other areas. The Company's retail phone centers are located
primarily in low-income, urban areas, some of which may have high crime rates.
Although the Company believes that it has taken sufficient steps to provide
adequate security at its retail phone center locations, including the
installation of bullet-proof barriers at customer service counters, armored car
collection of cash receipts, on-site lock boxes and brightly lit, street visible
store layouts, there can be no assurance that incidents of crime will not
interfere with the Company's operations at such locations.
Taxes. The sale of long distance services through the use of prepaid
phone cards has been deemed a taxable event by the Internal Revenue Service (the
"IRS") and most state taxing authorities. The IRS recently established a task
force to determine the application of the 3% federal telecommunications excise
tax (the "Telecommunications Excise Tax") to the sale and provision of long
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<PAGE>
distance services through prepaid phone cards. The IRS' policy, if different
than the Company's policy, could materially affect the Company's operations.
Additionally, the Company believes that the sale of long distance services
through prepaid phone cards is also subject to state sales and use taxes.
However, most state taxing authorities have not established clear policies on
the application of the sales and use taxes to the provision of long distance
services through prepaid phone cards. While the Company reasonably believes it
is accurately accruing for the expense of state sales and use taxes on its
financial statements, there can be no assurance that a state taxing authority
will concur with the Company's method of determining the sales and use taxes
payable.
Dependence on Key Personnel. The success of the Company is largely
dependent on the personal efforts of Shelly Finkel, its Chairman of the Board,
Gary Wasserson, its Chief Executive Officer, and other key personnel. Although
the Company has entered into employment agreements with Messrs. Finkel and
Wasserson, the loss of their services would have a material adverse effect on
the Company's business and prospects. The Company's employment agreement with
Mr. Finkel requires him to devote only 50% of his business time to the Company's
affairs. In addition, in order to successfully implement and manage its proposed
expansion, the Company will be dependent upon, among other things, the
successful recruiting of qualified management, marketing, sales and creative
personnel with experience in business activities conducted by the Company.
Competition for the type of qualified individuals sought by the Company is
intense and there can be no assurance that the Company will be able to retain
existing employees or that it will be able to find, attract and retain
additional qualified personnel on acceptable terms.
Continuing Control by Management. Two groups of securityholders of the
Company have entered into a voting agreement pursuant to which each group has
agreed to vote for the other group's designees as directors of the Company. Such
securityholders, in the aggregate, own approximately 47.6% of the Company's
outstanding shares of Common Stock, without giving effect to the exercise of any
outstanding warrants, options or convertible securities. Accordingly, such
securityholders, acting together, are in a position to effectively control the
Company, including the election of all or a majority of the directors of the
Company.
No Dividends. The Company has never paid cash dividends on its Common Stock
and does not expect to pay cash dividends in the foreseeable future.
Tax Loss Carryforwards. At December 31, 1995, Global Link had net
operating loss carryforwards ("NOLs") aggregating approximately $4,985,000 to
offset future taxable income. Under Section 382 of the Internal Revenue Code of
1986, as amended (the "Code"), utilization of prior NOLs is limited after an
ownership change, as defined in such Section 382, to an amount equal to the
value of the loss corporation's outstanding stock immediately before the date of
the ownership change, multiplied by the federal long-term tax-exempt rate in
effect during the month that the ownership change occurred. As a result of the
Merger, Global Link may be subject to limitations on the use of its NOLs as
provided under Section 382. Accordingly, there can be no assurance that a
significant amount of Global Link's existing NOLs will be available to the
Company. In the event that the Company achieves profitability, as to which there
can be no assurance, such limitation would have the effect of increasing the
Company's tax liability and reducing the net income and available cash resources
of the Company in the future.
Litigation. The Company is involved from time to time in litigation
incidental to its business. Such litigation can be expensive and time consuming
to prosecute or defend and could have the effect of causing the Company's
customers to delay or cancel purchase orders until such lawsuits are resolved.
Although the Company believes that none of its pending litigation matters,
individually or in the aggregate, will have a material adverse effect on the
Company's operating results or financial condition, there can be no assurance of
this.
Possible Delisting of Securities from Nasdaq System; Risks Associated with
Low-Priced Stocks. The Company's Common Stock and publicly-traded Redeemable
Warrants are currently listed
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<PAGE>
on Nasdaq. However, in order to continue to be listed on Nasdaq, a company must
maintain $2,000,000 in total assets, a $200,000 market value of the public float
and $1,000,000 in total capital and surplus. In addition, continued inclusion
requires two market makers and a minimum bid price of $1.00 per share; provided,
however, that if a company falls below such minimum bid price, it will remain
eligible for continued inclusion on Nasdaq if the market value of the public
float is at least $1,000,000 and the company has $2,000,000 in capital and
surplus. The failure to meet these maintenance criteria in the future may result
in the delisting of the Company's securities from Nasdaq and trading, if any, in
the company securities would thereafter be conducted in the non-Nasdaq
over-the-counter market. As a result of such delisting, an investor may find it
more difficult to dispose of, or to obtain accurate quotations as to the market
value of, the Company's securities. In addition, if the Common Stock was to
become delisted from trading on Nasdaq and the trading price of the Common Stock
was to fall below $5.00 per share, trading in the Common Stock would also be
subject to the requirements of certain rules promulgated under the Exchange Act,
which require additional disclosure by broker-dealers in connection with any
trades involving a stock defined as a penny stock (generally, any non-Nasdaq
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors (generally institutions). For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. The additional burdens imposed upon broker-dealers by
such requirements may discourage them from effecting transactions in the Common
Stock and Redeemable Warrants, which could severely limit the liquidity of the
Common Stock and Redeemable Warrants and the ability of purchasers in this
offering to sell the Common Stock and Redeemable Warrants in the secondary
market.
Shares Eligible for Future Sale. Substantially all of the Company's
outstanding shares of Common Stock and Redeemable Warrants have been or will be
registered for sale under the Securities Act or are eligible for sale under an
exemption therefrom. The possibility that substantial amounts of Common Stock or
Redeemable Warrants may be sold in the public market may adversely affect
prevailing market prices for the Common Stock or the Redeemable Warrants and
could impair the Company's ability to raise capital through the sale of its
equity securities.
Outstanding Warrants, Options and Convertible Debentures; Potential
Adverse Effect on Market Price of Common Stock and Warrants. To the extent that
outstanding options and warrants are exercised or Convertible Debentures are
converted, dilution of the percentage ownership of the Company's securityholders
will occur, and any sales in the public market of the Common Stock underlying
such options, warrants and Convertible Debentures may adversely affect
prevailing market prices for the Common Stock and the Redeemable Warrants.
Moreover, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since the holders of outstanding
options and warrants can be expected to exercise them at a time when the Company
would, in all likelihood, be able to obtain any needed capital on terms more
favorable to the Company than those provided in the outstanding options and
warrants.
Possible Inability to Exercise Redeemable Warrants. The Company intends
to qualify the sale of the Common Stock issuable upon exercise of the Redeemable
Warrants in a limited number of states. Although certain exemptions in the
securities laws of certain states might permit Redeemable Warrants to be
transferred to purchasers in states other than those in which the Redeemable
Warrants were initially qualified, the Company will be prevented from issuing
Common Stock in such other states upon the exercise of the Redeemable Warrants
unless an exemption from qualification is available or unless the issuance of
Common Stock upon exercise of the Redeemable Warrants is qualified. The Company
is under no obligation to seek, and may decide not to seek or may not be able to
obtain, qualification of the issuance of such Common Stock in all of the states
in which the ultimate purchasers of the Redeemable Warrants reside. In such a
case, the Redeemable Warrants held will expire and have no value if such
Redeemable Warrants cannot be sold.
15
<PAGE>
Potential Adverse Effect of Redemption of Warrants. The Redeemable
Warrants may be redeemed by the Company, with the consent Whale, upon notice of
not less than 30 days, at a price of $.10 per Redeemable Warrant, provided that
the closing bid quotation of the Common Stock on all 20 trading days ending on
the third day prior to the day on which the Company gives notice, has been at
least 187.5% of the then effective exercise price of the Redeemable Warrants
(currently $7.50, subject to adjustment). Redemption of the Redeemable Warrants
could force the holders to exercise the Redeemable Warrants and pay the exercise
price at a time when it may be disadvantageous for the holders to do so, to sell
the Redeemable Warrants at the then current market price when they might
otherwise wish to hold the Redeemable Warrants or to accept the redemption
price, which is likely to be substantially less than the market value of the
Redeemable Warrants at the time of redemption.
Authorization and Discretionary Issuance of Preferred Stock. The
Company's Certificate of Incorporation authorizes the issuance of "blank check"
preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the
Company's Common Stock. In the event of issuance, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. Although the Company has no
present intention to issue any shares of its preferred stock, there can be no
assurance that the Company will not do so in the future.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares and Redeemable Warrants by the Selling Securityholders. Of the 4,979,060
Shares offered hereby, 1,701,255 Shares are issuable upon exercise of the
Redeemable Warrants, Debenture Warrants, Consulting Warrants and UPO. If such
securities are fully exercised, the Company will receive up to an aggregate of
$7,201,682 in gross proceeds, before deduction of the 5% warrant solicitation
fee which may be payable to Whale ($264,000, assuming that the fee is payable
with respect to all of the Redeemable Warrants). All proceeds received by the
Company, if any, will be used for working capital and general corporate
purposes. Pending application of the proceeds, the Company intends to place the
funds in interest-bearing investments such as bank accounts, certificates of
deposit and United States government obligations.
SELLING SECURITYHOLDERS
Of the 4,979,060 Shares being offered for resale by the Selling
Securityholders, (i) 2,371,123 Shares are currently outstanding; (ii) 906,682
Shares are issuable upon conversion of the Convertible Debentures; (iii) 21,255
Shares are issuable upon exercise of the Debenture Warrants issued in connection
with the issuance of the Convertible Debentures; (iv) 1,200,000 Shares are
issuable upon exercise of the Redeemable Warrants issued in connection with the
May 1996 Private Placement; (v) 300,000 Shares are issuable upon exercise of the
Consulting Warrants; (vi) 60,000 Shares are issuable upon exercise of the UPO
issued to Whale in connection with the May 1996 Private Placement; and (vii)
120,000 Shares are issuable upon exercise of the Redeemable Warrants underlying
the UPO. Of the 1,320,000 Redeemable Warrants being offered for sale by the
Selling Securityholders, (i) 1,200,000 Redeemable Warrants were issued in
connection with the May 1996 Private Placement and are currently outstanding and
(ii) 120,000 Redeemable Warrants are issuable upon exercise of the UPO. Unless
otherwise indicated in the footnotes hereto or otherwise in this Prospectus,
none of the Selling Securityholders has had a material relationship with the
Company within the past three years. Unless otherwise indicated, share ownership
set forth in each table below is independent of share ownership reflected in any
other table set forth below.
16
<PAGE>
(a) Shares of Common Stock being registered for resale by certain Selling
Securityholders holding outstanding Shares as a result of the merger of
Global Link and the Company
<TABLE>
# of Shares # of Shares
Name of Holder(1) Before Offering to be Sold After the Offering(2)
- ----------------- --------------- ---------- ---------------------
# of Shares Percent
----------- -------
<S> <C> <C> <C> <C>
Gary Aidekman 363 363 -- *
Kenneth Aidekman 363 363 -- *
Shirley Aidekman 363 363 -- *
Alvin Allen 1,449 1,449 -- *
Dr. Nassar Altorki 363 363 -- *
Irfan Amanat 181 181 -- *
Oman Amanat 181 181 -- *
Banner Candy Manufacturing Corp. 363 363 -- *
Eric Bernthal 723 723 -- *
Martin Bresler 363 363 -- *
Marc A. Brilliant 181 181 -- *
Jon Brunekant 363 363 -- *
Herbert L. Camp 1,087 1,087 -- *
Joseph Cobitz 363 363 -- *
Martin Cohn 723 723 -- *
Steve Colin 543 543 -- *
Den Associates LLC 363 363 -- *
Beatriz Esposito-Lopresti 1,295 1,295 -- *
Steven Fleischer 181 181 -- *
Ralph Foglia 181 181 -- *
Bernard Frank 183,533 183,533 -- *
Deborah Frank 122,007 122,007 -- *
Jody Frank 16,191 16,191 -- *
Jody and Deborah Frank jointly 48,572 48,572 -- *
Jody Frank a/c for Aaron Frank 32,381 32,381 -- *
Jody Frank a/c for Rebekah Frank 32,381 32,381 -- *
Jody Frank a/c for Lucy Frank 32,381 32,381 -- *
Michael Frank a/c for Dylan Frank 3,238 3,238 -- *
Michael Frank a/c for Nora Frank 3,238 3,238 -- *
Mindy Sue Frank 3,238 3,238 -- *
Scott Frank a/c for Milo Frank 3,238 3,238 -- *
Mr. and Mrs. Burton Geyer 723 723 -- *
Grosvenor Multi-Strategy Fund, L.P. 363 363 -- *
Mary Ellen Grunther IRA 363 363 -- *
Michele Hanft 181 181 -- *
Gordon Harris 363 363 -- *
Stephen J. Hasbrook 363 363 -- *
Bruce W. Hill 181 181 -- *
Hilltop Offshore Limited 1,449 1,449 -- *
Hilltop Partners, L.P. 8,336 8,336 -- *
Paul Hindes 363 363 -- *
Joel Hornstein 12,953 12,953 -- *
Alice Hung 1,295 1,295 -- *
Richard Jayson 363 363 -- *
Barry Kramer 363 363 -- *
Marvin Lipton 363 363 -- *
William Malenbaum 363 363 -- *
Elayna Markoff 363 363 -- *
17
<PAGE>
Edward Marx a/c for Gregory Marx 3,238 3,238 -- *
Edward Marx a/c for Michael Marx 3,238 3,238 -- *
Edward Marx a/c for Stefanie N. Marx 3,238 3,238 -- *
The Henry Marx Living Trust 363 363 -- *
Edward Marx 99,341 99,341 -- *
Miriam Meshel 363 363 -- *
Daniel Murdock 363 363 -- *
Dr. Eric Nash 181 181 -- *
Peggy Nash Marx 97,145 97,145 -- *
Dr. Thomas Nash 363 363 -- *
New York Security Systems Pension 181 181 -- *
Peoples Telephone Company, Inc. 636,866 636,866 -- *
A. Dan Phillips 363 363 -- *
Eugene Porcaro 181 181 -- *
Donald Ptalis 10,723 723 10,000(3) *
Mr. and Mrs. Joel Sharenow 363 363 -- *
Dean Small 363 363 -- *
Joseph Smith 181 181 -- *
Harold Staenberg 723 723 -- *
Dr. Berton Taffet 723 723 -- *
Mark Turnowski 181 181 -- *
Peter Von Culin 363 363 -- *
Gary and Ellen Wasserson 400,523 390,523 10,000(4) *
Ira Weingarten 181 181 -- *
Bernard Wesson 363 363 -- *
Wolfson Equities 5,074 5,074 -- *
Zev Wolfson IRA Rollover 5,074 5,074 -- *
Mr. and Mrs. Ira Zucker 363 363 -- *
Irving Zucker Art Books, Inc. 363 363 -- *
</TABLE>
(b) Shares of Common Stock being registered for resale by certain Selling
Securityholders acquirable upon conversion or exercise of the
Convertible Debentures and Debenture Warrants
<TABLE>
# of Shares # of Shares
Underlying Underlying
Convertible Debenture
Debentures Warrants
Prior to Prior to # of Shares After the Offering(2)
Name(1) Offering Offering to be Sold # of Shares Percent
- ---- -------- -------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
Gary Aidekman 8,096 190 8,286 -- *
Kenneth Aidekman 8,096 190 8,286 -- *
Shirley Aidekman 8,096 190 8,286 -- *
Alvin Allen 32,382 759 33,141 -- *
Nasser Altorki 8,096 190 8,286 -- *
Irfan Amanat 4,048 95 4,143 -- *
Oman Amanat 4,048 95 4,143 -- *
18
<PAGE>
Banner Candy 8,096 190 8,286 -- *
Manufacturing Corp.
Eric Bernthal 16,191 380 16,571 -- *
Martin Bresler 8,096 190 8,286 -- *
Marc A. Brilliant 4,048 95 4,143 -- *
Jon Brunekant 8,096 190 8,286 -- *
Herbert L. Camp 24,287 569 24,856 -- *
Joseph Cobitz 8,096 190 8,286 -- *
Martin Cohn 16,191 380 16,571 -- *
Steve Colin 12,144 285 12,429 -- *
Den Associates, LLC 8,096 190 8,286 -- *
Steven Fleischer 4,048 95 4,143 -- *
Ralph Foglia 4,048 95 4,143 -- *
Mr. & Mrs. Burton Geyer 16,191 380 16,571 -- *
Grosvenor Multi-Strategy 8,096 190 8,286 -- *
Fund, L.P.
Mary Ellen Gunther IRA 8,096 190 8,286 -- *
Michele Hanft 4,048 95 4,143 -- *
Gordon Harris 8,096 190 8,286 -- *
Stephen J. Hasbrook 8,096 190 8,286 -- *
Bruce W. Hill 4,048 95 4,143 -- *
Hilltop Offshore Limited 32,382 759 33,141 -- *
Hilltop Partners, L.P. 186,194 4,360 190,544 -- *
Paul Hindes 8,096 190 8,286 -- *
Richard Jayson 8,096 190 8,286 -- *
Barry Kramer 8,096 190 8,286 -- *
Marvin Lipton 8,096 190 8,286 -- *
William Malenbaum 8,096 190 8,286 -- *
Elayna Markoff 8,096 190 8,286 -- *
The Henry Marx Living 8,096 190 8,286 -- *
Trust
Miriam Meshel 8,096 190 8,286 -- *
Daniel Murdock 8,096 190 8,286 -- *
Eric Nash 4,048 95 4,143 -- *
Thomas Nash 8,096 190 8,286 -- *
New York Security 4,048 95 4,143 -- *
Systems Pension
A. Dan Phillips 8,096 190 8,286 -- *
Eugene Procoro 4,048 95 4,143 -- *
19
<PAGE>
Donald Ptalis 16,191 380 16,571 10,000(3) *
Mr. & Mrs. Joel 8,096 190 8,286 -- *
Sharenow
Dean Small 8,096 190 8,286 -- *
Joseph Smith 4,048 951 4,143 -- *
Harold Steinberg 16,191 380 16,571 -- *
Berton Taffet 16,191 380 16,571 -- *
Mark Turnowski 4,048 95 4,143 -- *
Peter Von Culin 8,096 190 8,286 -- *
Ira Wiengarten 4,048 95 4,143 -- *
Bernard Wesson 8,096 190 8,286 -- *
Wolfson Equities 113,336 2,654 115,990 -- *
Zev Wolfson IRA Rollover 113,336 2,654 115,990 -- *
Mr. & Mrs. Ira Zucker 8,096 190 8,286 -- *
Irving Zucker Art Books, 8,096 190 8,286 -- *
Inc.
</TABLE>
(c) Shares of Common Stock and Redeemable Warrants issued in the May 1996
Private Placement and Shares to be issued upon exercise of the
Redeemable Warrants being registered for resale by certain Selling
Securityholders.
<TABLE>
# of Shares
of Common
Stock # of
# of Shares # of Underlying Redeemable After the Offering(2)
of Common Redeemable Redeemable # of Shares Warrants ---------------------
Name(1) Stock Warrants Warrants to be Sold to be sold # of Shares Percent
- ---- ----- -------- -------- ---------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Wayne K. Adams 10,000 20,000 20,000 30,000 20,000 -- *
Nasser K. Altorki 10,000 20,000 20,000 30,000 20,000 -- *
Gerald and Arleen 10,000 20,000 20,000 30,000 20,000 -- *
Arsenault JTWROS
Baron Associates 20,000 40,000 40,000 60,000 40,000 -- *
John B. Berding 10,000 20,000 20,000 30,000 20,000 -- *
Jean-Marc Bolle 5,000 10,000 10,000 15,000 10,000 -- *
Alfred Bracher, III 20,000 40,000 40,000 60,000 40,000 -- *
Marcello Caira 5,000 10,000 10,000 15,000 10,000 -- *
Brant Cali 10,000 20,000 20,000 30,000 20,000 -- *
John Cali 5,000 10,000 10,000 15,000 10,000 -- *
Herbert L. Camp 20,000 40,000 40,000 60,000 40,000 -- *
Cassandra 5,000 10,000 10,000 15,000 10,000 -- *
Investment Corp.
Central Investments 20,000 40,000 40,000 60,000 40,000 -- *
Ltd.
Cotran Investments 10,000 20,000 20,000 30,000 20,000 -- *
Ltd.
Eatwell Equities, 5,000 10,000 10,000 15,000 10,000 -- *
Inc.
20
<PAGE>
Forward Issue 10,000 20,000 20,000 30,000 20,000 -- *
Limited
Neil W. and Nita R. 5,000 10,000 10,000 15,000 10,000 -- *
Freeman
Daniel Roger Glynn, 10,000 20,000 20,000 30,000 20,000 -- *
Jr.
Glenn Golenberg 10,000 20,000 20,000 30,000 20,000 -- *
Raquel Grunwald 25,000 50,000 50,000 75,000 50,000 -- *
Ronald I. Heller -- 10,000 20,000 20,000 30,000 20,000 -- *
IRA
George H. Holsten, 10,000 20,000 20,000 30,000 20,000 -- *
III
Daniel M. Keenan 2,500 5,000 5,000 7,500 5,000 -- *
Janice C. 10,000 20,000 20,000 30,000 20,000 -- *
Kimbrough
Ledger Domain 5,000 10,000 10,000 15,000 10,000 -- *
Partners
Daniel T. McFadden 5,000 10,000 10,000 15,000 10,000 -- *
John T. Melin 5,000 10,000 10,000 15,000 10,000 -- *
MSJ Larson Inc. 5,000 10,000 10,000 15,000 10,000 -- *
Linda Nash 10,000 20,000 20,000 30,000 20,000 -- *
Ronald Nash -- IRA 40,000 80,000 80,000 120,000 80,000 -- *
Ronald and Linda 40,000 80,000 80,000 120,000 80,000 -- *
Nash JTWROS
Eli Oxenhorn 20,000 40,000 40,000 60,000 40,000 290,340(5) 2.6
Penparc Limited 20,000 40,000 40,000 60,000 40,000 -- *
Poseidon Capital 5,000 10,000 10,000 15,000 10,000 --
Pension & Profit
Sharing Plan *
Quaestus SA 10,000 20,000 20,000 30,000 20,000 -- *
Rainwater 5,000 10,000 10,000 15,000 10,000 *
Enterprises Ltd. --
Herbert and Yvonne 10,000 20,000 20,000 30,000 20,000 -- *
Rechter JTWROS
Jonathan S. Rock 10,000 20,000 20,000 30,000 20,000 -- *
and John R. Rock
JTWROS
Jesse D. Roggen 5,000 10,000 10,000 15,000 10,000 -- *
Archibald and 5,000 10,000 10,000 15,000 10,000 -- *
Frances Rufty
Living Trust
Urs Rutsche 5,000 10,000 10,000 15,000 10,000 -- *
Peter Sauer 5,000 10,000 10,000 15,000 10,000 -- *
George Schimenti 2,500 5,000 5,000 7,500 5,000 -- *
Daniel Schlauri 5,000 10,000 10,000 15,000 10,000 -- *
John C. Schleyer 5,000 10,000 10,000 15,000 10,000 -- *
Karl A. Schurmann 10,000 20,000 20,000 30,000 20,000 -- *
Ramon Shane Sep 5,000 10,000 10,000 15,000 10,000 *
IRA --
Eli and Ester 10,000 20,000 20,000 30,000 20,000 -- *
Shapiro JTWROS
Brad Shiffman 5,000 10,000 10,000 15,000 10,000 -- *
Dean Small 10,000 20,000 20,000 30,000 20,000 -- *
Arthur Steinberg 10,000 20,000 20,000 30,000 20,000 -- *
Robert Steinberg 5,000 10,000 10,000 15,000 10,000 -- *
Patrick Storm and 5,000 10,000 10,000 15,000 10,000 -- *
Marie Storm
JTWROS
Berton Taffet 10,000 20,000 20,000 30,000 20,000 -- *
21
<PAGE>
Wendy and Robert 10,000 20,000 20,000 30,000 20,000 -- *
Ull JTWROS
Wall Street Partners 15,000 30,000 30,000 45,000 30,000 -- *
Investment
Partnership
Sylvia T. Wells 5,000 10,000 10,000 15,000 10,000 -- *
Woodland Partners 20,000 40,000 40,000 60,000 40,000 323,338(6) 2.9
</TABLE>
(d) Shares of Common Stock and Redeemable Warrants and Shares underlying
Redeemable Warrants being registered for resale by certain Selling
Securityholders upon exercise of Consulting Warrants and UPO.
<TABLE>
# of Shares
# of Shares Underlying # of
Underlying Redeemable Redeemable
Consulting # of Shares Warrants Warrants # of
Warrants Underlying Underlying Underlying Redeemable
Prior to UPO Prior UPO Prior UPO Prior # of Shares Warrants
Name(1) Offering to Offering to Offering to Offering to be Sold to be Sold After the Offering(2)
- ---- --------- ----------- ----------- ----------- ---------- ---------- ------------------
# of
Shares Percent
------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Craig Shapiro 125,000 -- -- -- 125,000 -- -- *
Frog Hollow Partners 50,000 -- -- -- 50,000 -- -- *
John Freeman 25,000 -- -- -- 25,000 -- -- *
Whale Securities Co., 100,000 60,000 120,000 120,000 280,000 120,000 -- *
L.P.(7)
<FN>
* Less than 1%.
(1) To the best of the Company's knowledge, except as otherwise set forth
below, all of such securities are beneficially owned and sole investment
and voting power is held by the persons indicated. In accordance with Rule
13d-3 under the Exchange Act, a person is deemed to be the beneficial owner
of a security for purposes of the Rule if he or she has or shares voting
power or investment power with respect to the security or has the right to
acquire ownership within sixty days. As used herein, "voting power" is the
power to vote or direct the voting of securities voting rights and
"investment power" is the power to dispose of or direct the disposition of
securities.
(2) Assumes all of the Convertible Debentures, Debenture Warrants, Consulting
Warrants, UPO and Redeemable Warrants are fully converted or exercised.
(3) Includes 10,000 Shares issuable upon exercise of currently exercisable
options. Mr. Donald Ptalis is a director of the Company.
(4) Includes 10,000 Shares issuable upon exercise of currently exercisable
options. Does not include 125,000 Shares underlying options which become
exercisable commencing in February 1997. Mr. Gary Wasserson is the Chief
Executive Officer and a director of the Company.
(5) Includes 1,000 Shares and 1,000 Shares issuable upon exercise of Redeemable
Warrants owned by Mr. Oxenhorn's son, of which he disclaims beneficial
ownership, 54,170 shares of Common Stock issuable upon exercise of
Redeemable Warrants and 100,000 shares of Common Stock issuable upon
exercise of currently exercisable options.
22
<PAGE>
(6) Includes 15,000 shares of Common Stock owned by The Marilyn and Barry
Rubenstein Family Foundation, a tax exempt organization of which Mr.
Rubenstein is a trustee, and 20,000 shares of Common Stock owned by Marilyn
Rubenstein, Mr. Rubenstein's spouse. Mr. Rubenstein disclaims beneficial
ownership over all of such shares. Also includes 54,500 shares of Common
Stock beneficially owned by Woodland Partners, a New York general
partnership of which Mr. Rubenstein is a partner. 10,500 of such shares
represent Marilyn Rubenstein's equity interest in such partnership and Mr.
Rubenstein disclaims beneficial ownership over such shares. Also includes
9,000 shares of Common Stock owned by the Woodland Venture Fund, a New York
limited partnership, of which Mr. Rubenstein is a general partner. 5,557 of
such shares represent Mr. Rubenstein's equity interest in such partnership
and he disclaims beneficial ownership over the remaining 3,443 shares. Also
includes 54,169 shares of Common Stock issuable upon exercise of Redeemable
Warrants and 100,000 shares issuable upon exercise of currently exercisable
options.
(7) Does not include shares held in Whale's trading account. Excludes 150,000
shares of Common Stock and 150,000 Redeemable Warrants (and 150,000 shares
underlying such warrants) issuable to Whale pursuant to the underwriter's
warrant issued in connection with the initial public offering of the
Company. All of the underwriter's warrants to purchase such shares are held
in the name of Whale Securities Co., L.P. for the account of its equity
owners and certain of its employees, pending transferability of such
warrants pursuant to the rules of the National Association of Securities
Dealers, Inc. See "Plan of Distribution" for a description of certain fees
paid and securities issued to Whale by the Company.
</FN>
</TABLE>
23
<PAGE>
PLAN OF DISTRIBUTION
The Shares and Redeemable Warrants offered by the Selling
Securityholders may be offered and sold from time to time as market conditions
permit in the over-the-counter market, or otherwise, at prices and terms then
prevailing or at prices related to the then-current market price, or in
negotiated transactions. The Shares and Redeemable Warrants may be sold by one
or more of the following methods, without limitation: (i) a block trade in which
a broker or dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (ii) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (iii)
ordinary brokerage transactions and transactions in which the broker solicits
purchases; and (iv) transactions between sellers and purchasers without a
broker/dealer. In effecting sales, brokers or dealers engaged by the Selling
Securityholders may arrange for other brokers or dealers to participate. Such
brokers or dealers (which may include Whale) may receive commissions or
discounts from Selling Securityholders in amounts to be negotiated. Such brokers
and dealers and any other participating brokers and dealers may be deemed to be
"underwriters" within the meaning of the Securities Act, in connection with such
sales.
All costs, expenses and fees in connection with the registration of the
securities offered hereby will be borne by the Company. Brokerage commissions,
if any, attributable to the sale of such securities will be borne by the Selling
Securityholders.
The Company has agreed, in connection with the exercise of the
Redeemable Warrants pursuant to solicitation, to pay to Whale for bona fide
services provided a fee of 5% of the exercise price for each Redeemable Warrant
exercised, provided, however, that Whale will not be entitled to receive such
compensation in Redeemable Warrant exercise transactions in which (i) the market
price of the Common Stock at the time of the exercise is lower than the exercise
price of the Redeemable Warrants; (ii) the Redeemable Warrants are held in any
discretionary account; (iii) disclosure of compensation arrangements is not
made, in addition to the disclosure provided in this Prospectus, in documents
provided to holders of Redeemable Warrants at the time of exercise; (iv) the
holder of the Redeemable Warrants has not confirmed in writing that Whale
solicited such exercise; or (v) the transaction was in violation of Rule 10b-6
promulgated under the Exchange Act. In addition to soliciting, either orally or
in writing, the exercise of the Redeemable Warrants, such services may also
include disseminating information, either orally or in writing, to the holders
of the Redeemable Warrants about the Company or the market for the Company's
securities, and assisting in the processing of the exercise of the Redeemable
Warrants.
Whale served as the placement agent in connection with the May 1996
Private Placement and received a commission equal to 10% of the gross proceeds
from the sale of the Units (except that there was no commission paid with
respect to 2-1/2 Units sold to certain purchasers) and a $15,000 nonaccountable
expense allowance. Whale also received a UPO to purchase three Units (up to
60,000 Shares and 120,000 Redeemable Warrants) at an exercise price of $100,000
per Unit, exercisable until May 10, 2001. The Company also agreed to indemnify
Whale against certain liabilities in connection with the Offering under the
Securities Act.
Whale acted as the underwriter in connection with the Company's IPO, in
which the Company raised approximately $7,650,000 of gross proceeds. In
connection with the IPO, the Company paid to Whale 10% commissions and a 3%
nonaccountable expense allowance, granted Whale an option to purchase 150,000
shares of Common Stock and/or 150,000 Redeemable Warrants, and granted Whale
certain other rights.
In April 1995, the Company issued to a designee of Whale the April 95
Common Stock Purchase Warrant, exercisable for five years, to purchase 50,000
shares of Common Stock at $5.00 per share in consideration of Whale granting the
Company the right of first refusal to pursue any prospective acquisition target
in the phone card industry that Whale identifies prior to February 1998. In
October 1995, in further consideration of such right of first refusal, the
Company issued to another designee of Whale the October
24
<PAGE>
95 Common Stock Purchase Warrant, exercisable for five years, to purchase 50,000
shares of Common Stock at $5.00 per share. In January 1996, the Company entered
into a one-year consulting agreement with Whale pursuant to which Whale and its
designees will assist the Company in developing, studying and evaluating
financing and merger and acquisition proposals. In consideration of such
services, the Company issued Whale and its designees the January 96 Common Stock
Warrants, exercisable for five years, to purchase 200,000 shares of Common Stock
at $5.125 per share. The Company also paid a fee of $100,000 to Whale in
consideration of Whale's assistance in connection with the Company's evaluation
of the acquisition of Global Link and agreed to pay Whale certain other
compensation in the event another acquisition is consummated.
LEGAL MATTERS
The legality of the securities being offered hereby has been passed upon
by Graubard Mollen & Miller, New York, New York, general counsel to the Company.
EXPERTS
The consolidated financial statements of Global Telecommunication
Solutions, Inc. and subsidiaries as of December 31, 1995 and 1994, and for the
years then ended have been incorporated by reference herein from the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1995 in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, included therein and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Global Link Teleco Corporation as of
December 31, 1995 and for the year then ended have been incorporated by
reference herein from the Company's Current Report on Form 8-K, filed March 15,
1996, and as thereafter amended on May 10, 1996, in reliance upon the report of
KPMG Peat Marwick LLP, independent public accountants, included therein and upon
authority of such firm as experts in accounting and auditing.
The financial statements of Global Link Teleco Corporation as of
December 31, 1994 and for the period from inception (March 28, 1994) to December
31, 1994 have been incorporated by reference herein from the Company's Current
Report on Form 8-K, filed March 15, 1996, and as thereafter amended on May 10,
1996, in reliance upon the report of Price Waterhouse LLP, independent public
accountants, included therein and upon authority of such firm as experts in
accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
Common Stock offered hereby, other than underwriting discounts and commissions:
SEC filing fee.................................................. $10,286.47
Legal fees and expenses......................................... 25,000.00
Accounting fees and expenses.................................... 6,000.00
Miscellaneous................................................... 8,713.53
Total.................................................. $50,000.00
ITEM 15. Indemnification of Directors and Officers
The Company's Certificate of Incorporation provides that all directors,
officers, employees and agents of the Registrant shall be entitled to be
indemnified by the Company to the fullest extent permitted by law.
Section 145 of the Delaware General Corporation Law concerning
indemnification of officers, directors, employees and agents is set forth below.
"Section 145. Indemnification of officers, directors, employees and
agents; insurance.
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgement in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged
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to be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under sections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil or
criminal action, suite or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer, to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves
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services by, such director, officer, employee or agent with respect to an
employee benefit plan, its participants or beneficiaries; and a person who acted
in good faith an in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the corporation" as
referred to in this section.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers, and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in a successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to the court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
ITEM 16. Exhibits
The following exhibits noted by an asterisk (*) are hereby incorporated
by reference from the Company's Registration Statement on Form SB-2 (No.
33-85998) declared effective by the Securities and Exchange Commission on
December 14, 1994 and amended on August 8, 1995; by double asterisk (**) are
hereby incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994; by triple asterisk (***) are hereby
incorporated by reference from the Company's Current Report on Form 8-K, filed
with the Securities and Exchange Commission on March 15, 1996; and by quadruple
asterisk (****) are hereby incorporated by reference to the Company's Post-
Effective Amendment No. 2 to Registration Statement on Form SB-2 on Form S-3
(No. 33-85998) filed with the Securities and Exchange Commission on May 30,
1996.
Exhibit
Number Description
3.1* Certificate of Incorporation
3.2* Amendment to Certificate of Incorporation
3.3* By-Laws
3.4*** Certificate of Merger of Merger Sub into Global Link
4.1* Form of Common Stock Certificate
4.2* Form of Redeemable Warrant Certificate
4.3* Warrant Agreement
4.4* Underwriter's Warrant
4.5* Stock Option Agreement between the Company and
Shelly Finkel
4.6* Stock Option Agreement between the Company and Paul
Silverstein
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Exhibit
Number Description
4.7* Stock Option Agreement between the Company and James
Koplik (originally exhibit no. 4.10 to the Company's
Registration Statement on Form SB-2 (No. 33-85998))
4.8** Stock Option Agreement between the Company and John
McCabe
4.9 Warrant Agreement dated April 15, 1995 between
Company and Craig Shapiro (to be filed by amendment)
4.10 Warrant Agreement dated October 26, 1995 between
Company and Frog Hollow Partners (to be filed by
amendment)
4.11 Warrant Agreement dated January 22, 1996 between
Company and Whale
Securities Co., L.P. (to be filed by amendment)
4.12**** Unit Purchase Option dated May 10, 1996 issued to
Whale Securities Co., L.P.
5.1 Opinion of Graubard Mollen & Miller (including
consent) (filed herewith)
10.1* Sublease for 342 Madison Avenue, New York, New York
10.2* Sublease for additional space at 342 Madison Avenue,
New York, New York
10.3* Employment Agreement between the Company and Shelly
Finkel
10.4* Employment Agreement between the Company and Paul
Silverstein
10.5* Employment Agreement between the Company and Maria
Bruzzese
10.6* 1994 Performance Equity Plan
10.7* Service Agreement between the Company and MCI
Telecommunications Corporation (originally exhibit
no. 10.17 to the Company's Registration Statement
on Form SB-2 (No. 33-85998))
10.8* Service Agreement between the Company and Sprint
Corporation (originally exhibit no. 10.18 to the
Company's Registration Statement on Form SB-2 (No.33-
85998))
10.9* Service Agreement between Independent Properties
Sales Corporation ("IPSC")and Metromedia
Communications Corporation ("Metromedia," which was
later acquired by WorldCom) (originally exhibit no.
10.19 to the Company's Registration Statement on
Form SB-2 (No. 33-85998))
10.10* Consent between IPSC and Metromedia allowing the
assignment to the Company of IPSC's right to receive
services from Metromedia.
10.11** Employment Agreement between the Company and John
McCabe
10.12** Consulting Agreement between the Company and Barry
Rubenstein
10.13** Consulting Agreement between the Company and Eli
Oxenhorn
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<PAGE>
Exhibit
Number Description
10.14*** Merger Agreement by and among the Company, Merger
Sub and Global Link
10.15*** Directors Voting Agreement
10.16*** Peoples Agreement, together with the Company's
Guaranty of Peoples Second Payment
10.17*** Ancillary Agreement between Global Link and Peoples
regarding payment of the Peoples Accounts
Receivable, together with Holding Corp's Guaranty of
such payment
10.18*** Amended and Restated Securities Purchase Agreement
10.19*** The Company's Guaranty of Debentures
10.20*** Employment Agreement between the Company and Gary
Wasserson
10.21*** Employment Agreement between the Company and David
Tobin
10.22*** Stock Option Agreement between the Company and Gary
Wasserson
10.23*** Stock Option Agreement between the Company and David
Tobin
10.24* Sublease for space at 40 Elmont Road, Elmont, New
York (originally exhibit no. 10.14 to Post-Effective
Amendment No. 1 to the Company's Registration
Statement on Form SB-2 (No. 33-85998))
10.25**** Agency Agreement between the Company and Whale for
May 1996 Private Placement
10.26**** Form of Subscription Agreement for May 1996 Private
Placement
10.27**** Form of Registration Rights Agreement for May 1996
Private Placement
10.28 Consulting Agreement dated January 22, 1996 between
Company and Whale Securities Co., L.P. (to be
filed by amendment)
23.1 Consent KPMG Peat Marwick LLP (filed herewith)
23.2 Consent of Price Waterhouse LLP (filed herewith)
24.3 Consent of Graubard Mollen & Miller (filed as part
of Exhibit 5.1) (filed herewith)
ITEM 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
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<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York on June 25, 1996.
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
By: /s/ Shelly Finkel
Shelly Finkel, Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Shelly Finkel and/or John McCabe his true
and lawful attorneys-in-fact and agents, each acting alone, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this Registration
Statement, including post-effective amendments, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, and hereby ratifies
and confirms all that said attorneys-in-fact and agents, each acting alone, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Shelly Finkel Chairman of the Board June 25, 1996
- ------------------------------
Shelly Finkel
/s/ Gary Wasserson Chief Executive Officer June 25, 1996
- ------------------------------- and Director
Gary Wasserson
/s/ Alan Kaufman Director June 25, 1996
- -------------------------------
Alan Kaufman
/s/ Jack Tobin Director June 25, 1996
- -------------------------------
Jack Tobin
/s/ John McCabe President and Director June 25, 1996
- -------------------------------
John McCabe
/s/ Donald Ptalis Director June 25, 1996
- -------------------------------
Donald Ptalis
/s/ Maria Bruzzese Chief Financial Officer June 25, 1996
- --------------------------------(and principal accounting
Maria Bruzzese officer)
<PAGE>
EXHIBIT 5.1
June 25, 1996
Global Telecommunication Solutions, Inc.
40 Elmont Road
Elmont, New York 11003
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-3
("Registration Statement") filed by Global Telecommunications Solutions, Inc.
("Company") under the Securities Act of 1933, as amended ("Act"), with respect
to an aggregate of 4,979,060 shares of common stock, par value $.01 per share
("Common Stock"), including (i) 2,371,123 shares of Common Stock currently
issued and outstanding and owned by certain persons listed in the Registration
Statement as Selling Securityholders ("Selling Securityholders"), (ii) 906,682
shares of Common Stock to be issued by the Company to certain of the Selling
Securityholders upon conversion of the 6% Convertible Debentures ("Convertible
Debentures"), (iii) 21,255 shares of Common Stock to be issued by the Company to
certain Selling Securityholders upon exercise of warrants issued in conjunction
with the Convertible Debentures ("Debenture Warrants"), (iv) 1,200,000 shares of
Common Stock to be issued by the Company to certain of the Selling
Securityholders upon exercise of the Redeemable Common Stock Purchase Warrants
("Redeemable Warrants") issued in the May 1996 Private Placement ("Private
Placement"), (v) 300,000 shares of Common Stock to be issued by the Company to
certain Selling Securityholders upon exercise of warrants issued to Whale
Securities Co., L.P. ("Whale") and its designees ("Consulting Warrants"), (vi)
60,000 shares of Common Stock to be issued by the Company upon exercise of the
Unit Purchase Option ("UPO") issued to Whale in connection with the Private
Placement, (vii) 120,000 shares of Common Stock to be issued by the Company upon
exercise of the Redeemable Warrants underlying the UPO, (viii) 1,200,000
Redeemable Warrants currently issued and outstanding and owned by certain of the
Selling Securityholders, and (ix) 120,000 Redeemable Warrants to be issued by
the Company to Whale upon exercise of the UPO.
We have examined such documents and considered such legal
matters as we have deemed necessary and relevant as the basis for the opinion
set forth below. With respect to such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as reproduced or certified copies, and the authenticity of the originals of
those latter documents. As to questions of fact material to this opinion, we
have, to the extent deemed appropriate, relied upon certain representations of
certain officers and employees of the Company.
Based upon the foregoing, it is our opinion that (i) the
shares of Common Stock currently outstanding and owned by certain of the Selling
Stockholders and being registered on the Registration Statement have been duly
authorized and legally issued, and are fully paid and non-assessable, (ii) the
shares of Common Stock being registered on the Registration Statement, to be
issued by the Company to certain of the Selling Stockholders upon conversion of
the Convertible Debentures and upon exercise of the Debenture Warrants,
Redeemable Warrants, Consulting Warrants and UPO have been duly authorized and,
when sold to the Selling Stockholders and paid for in the manner provided in the
Registration Statement and the various agreements and instruments governing the
Convertible Debentures, Debenture Warrants, Redeemable Warrants, Consulting
Warrants and UPO between each of the Selling Securityholders and the Company,
will be legally issued, fully paid and non-assessable, (iii) the Redeemable
Warrants currently outstanding and owned by certain of the Selling
Securityholders and being registered on the Registration Statement have been
duly authorized and legally issued, and (iv)
<PAGE>
Global Telecommunication Solutions, Inc.
June 25, 1996
Page 2
the Redeemable Warrants being registered on the Registration Statement to be
issued by the Company upon exercise of the UPO have been duly authorized and,
when sold and paid for in the manner provided in the Registration Statement and
the UPO, will be duly authorized and legally issued.
In giving this opinion, we have assumed that all certificates
for the Company's shares of Common Stock and Redeemable Warrants have been or,
prior to their issuance, will be duly executed on behalf of the Company by the
Company's transfer agent or warrant agent and registered by the Company's
registrar or warrant agent, if necessary, and will conform, except as to
denominations, to specimens which we have examined.
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement, to the use of our name as your counsel, and to all
references made to us in the Registration Statement and in the Prospectus
forming a part thereof. In giving this consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Act, or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ GRAUBARD MOLLEN & MILLER
GRAUBARD MOLLEN & MILLER
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Global Telecommunication Solutions, Inc. and subsidiaries
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
New York, New York
June 25, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Global
Telecommunication Solutions, Inc. of our report dated December 12, 1995, except
as to the merger described in Note 12, which is as of February 29, 1996, with
respect to the financial statements of Global Link Teleco Corp., included in
Global Telecommunication Solutions, Inc.'s Form 8-K/A Amendment No. 1 to Form
8-K dated May 10, 1996. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
PRICE WATERHOUSE LLP
June 25, 1996
<PAGE>
